Certificates of deposit (CDs) can be an arrow in your savings quiver, best used to generate good returns on cash you don’t need right away. Based on Curinos data, CD rates have been relatively stable over the past week even in the midst of a rate hike pause by the Federal Reserve.
Three-month CD rates
Rates on three-month CDs have increased since last week, rising by one basis point to 0.98% today.
Over the past month, rates on three-month CDs have climbed by eight basis points.
The current national high for a three-month CD is 5.83%, which would earn more than $355 in interest with a $25,000 deposit.
Six-month CD rates
When you opt for leading six-month CDs, you get a winning combination: solid interest rates and a commitment that’s only short-term.
The national average APY for six-month CDs is 1.40%, up slightly from 1.39% last week and 1.34% one month ago.
The current top national rate for a 6-month CD is 5.41%, according to the data available from Curinos’ database. But you may be able to find better deals by shopping around.
You’d earn almost $670 in interest if you put $25,000 in a six-month CD with a rate of 5.41%.
One-year CD rates
If you’re up for setting aside your savings for a full year, you’ll be able to snag even more impressive rates. One-year CDs can give you returns as high as, or even higher than, longer-term options.
Rates on 12-month CDs are on the rise. The national average APY is 1.66%, up two basis points from last week and six basis points from a month before.
The current national high for a 12-month CD is 5.60% which would earn more than $1,400 in interest with a $25,000 deposit.
Two-year CD rates
Interest rates on CDs with longer terms have remained stable.
The nationwide average APY stands at 1.55%, the same as last week , although up three basis points from one month ago.
The current national high for a 24-month CD is 5.15%. By locking in a rate close to this high, you’ll make the most of your returns on this longer-term investment.
If you invest $25,000 in a 24-month CD at the high rate of 5.15%, you’d earn around $2,650 in interest.
Three-year CD rates
The national average APY for a three-year CD stands at 1.49%, which is the same as last week and up from 1.47% a month ago.
The highest rate was 5.20%, which would net almost $4,105 in interest if you invested $25,000.
Methodology
To establish average certificate of deposit (CD) rates, Curinos focused on CDs intended for personal use. CDs that fall into specific categories are excluded, including promotional offers, relationship-based rates, private, youth, senior, student/minor, affinity, bump-up, no-penalty, callable, variable, step-up, auto transfer, club, gifts, grandfathered, internet-only and IRA CDs. The average CD rates quoted above are based on a $25,000 deposit.
Frequently asked questions (FAQs)
In 2022, savers finally experienced some relief with the rise of CD yields.
That trend has largely continued throughout 2023, as the Federal Reserve has continued to raise interest rates to moderate inflation. However, the Fed paused its interest rate policy in its most recent meeting in order to see how the economy responds to such high rates.
You’ll need a few key details to open a CD: your name, address, Social Security number, government-issued ID and phone number. You can open a CD online or in person, but you’ll probably find better rates online. Once you get the green light, you can fund the CD with cash from a linked bank account or one that’s not affiliated with the bank at all.
CD rates change on a regular basis, but the higher the better. As of July 24, 2023, the national average interest rate for a 12-month CD sat at 1.66% APY, according to data from Curinos. But you can find plenty of banks advertising APYs well above this average, especially if you take a look at the top contenders in our ranking of the best CD rates.
A basis point is the term used to describe one hundredth of one percentage point. Therefore, if the yield on a CD increased from 1.50% to 1.60%, it increased by 10 basis points.
On my first day of college, I chose a checking account because the bank was handing out free Frisbees. This was my only bank account for nearly 20 years.
Eventually I opened a savings account at the local credit union. Then I discovered the benefits of a high-yield savings account. Last autumn I opened my first certificate of deposit. And just a few months ago, I started a money market account.
Why so many accounts? To me, each bank account serves a specific purpose. Not every account is suitable for every need. Though not everyone needs (or wants) as many bank accounts as I now have, it’s still a good idea to make sure you’re using the right tool for the job.
Here are my four favorite types of bank accounts for personal use — and what they’re good for:
Rewards checking accounts Many small community banks and credit unions around the United States offer a special “rewards” checking account, a product administered by a company called Kasasa. These accounts carry restrictions and requirements (you have to make 10-12 debit purchases each month, the rate only applies to the first $30,000 or so in your account, etc.), but if you meet them, it’s tough to beat the returns.
I tried to maintain a rewards checking account at a local credit union, but ultimately it didn’t work for me. The credit union was too far away, and I wasn’t meeting the transaction requirements.
Here’s a huge list of rewards checking accounts by state. There are still checking accounts that offer 6%!
A rewards checking account is a great option for your main checking account, provided you have a nearby branch and you have a lot of monthly debit transactions. (ING Direct offers a checking account, but it’s not nearly as good as a rewards checking account.)
[Read more: Making the most of your checking account]
Online high-yield savings accounts Like most personal finance bloggers, I’m a fan of online high-yield savings accounts. While traditional banks and credit unions are offering a pittance on their accounts (my credit union’s “high-yield” account is at 0.10%!), you can still find rates above 1.50% through online accounts at CIT Bank, Ally Bank, and others.
I’ve used my online savings account at ING Direct for two primary purposes:
An emergency fund — When I first started my emergency fund, it was important to me that it be a little difficult to access. An online savings account was perfect because I can’t just decide on a whim to spend $10,000. If I want the money, I have to wait a couple of days for it to transfer to my main account. Perfect for an emergency fund.
Online high-yield savings accounts are a great way to save. Interest rates are low right now, but as the economy continues to improve, yields will rise.
[Read more: Which online high-yield savings account is best?]
Money market accounts As an alternate to an online high-yield savings account, consider a money market account from a brick-and-mortar institution. Until recently, my credit union offered an account with interest rates that were competitive with ING Direct. Now, however, they’ve dropped to under 1.00%.
Money market accounts require higher minimum balances than savings accounts. My credit union requires a $10,000 minimum deposit on a money market account, for example. Their minimum deposit for a savings account is $5. Some money market accounts allow limited check-writing privileges. They often limit the number of withdrawals per month.
A money market account can be a great choice if you’re attempting to consolidate all of your accounts at one bank, or if you’re wary of using an online bank.
[Read more: An introduction to money market accounts]
Certificates of deposit Certificates of deposit (often simply called CDs) are time deposits. You give your money to the bank and then promise not to touch it for a specific length of time. In general, the longer you agree to let the bank keep your money, the higher the interest rate you’ll receive.
Unlike a savings account, once you put your money into a CD, the interest rate does not fluctuate. If you open a 6-month CD at 3.50% and interest rates drop, you earn 3.50% the entire six months.
If certificates of deposit offer higher returns than a savings account, then why doesn’t everybody use them? The primary drawback to CDs is that they’re less liquid than a savings account; you can’t just move money in and out of them without penalty. You can take your money out of a CD before it “matures”, but you’re docked interest when you do. In fact, many (most?) banks penalize the interest amount, even if it isn’t earned (meaning you could lose part of your principal if you close your CD early).
Despite these limitations, CDs are great place to put money you don’t expect to need for a while. For most folks, a CD ladder is a good way to maximize returns.
[Read more: Put your savings on steroids with certificates of deposit and Current CD rates]
Peer Lending
If banks are not the right fit for you, there are other services out there such as peer lending. Peer lending services, such as Lending Club match people looking for a personal loan with people who are willing to fund it. Lending Club isn’t FDIC insured, but offers rates between 7%-9%, which are significantly higher than banks.
Choosing an account Each of these four types of accounts can be put to use to build your wealth. (And, of course, you’ll probably want a brokerage account for your Roth IRA and other investments.) As you look to choose an account, be sure to answer the following questions:
What do you need the account for? Long-term savings? Business? Personal? Every-day use?
How much will you keep in the account? Some accounts have minimum deposits in order to get the best interest rate. For example, my credit union’s money market account requires a $50,000 deposit in order to get the top rate.
How liquid does the money need to be? If you need quick and easy access, you’re best served by local brick-and-mortar banks. If you don’t mind a small delay, online banks will work. And if you can let your money go for months (or years) at a time, a certificate of deposit might be your best choice.
Do you need easy access to the money? Do you need a lot of ATMs? I tend to think that for day-to-day use, it’s best to have an account with a local brick-and-mortar bank. But for substantial savings, I’ve found it useful to create barriers. If I don’t have easy access to the money — if I have to jump through a few hoops to get it — then I’m less likely to spend it frivolously.
How important is online access?
How important is customer service?
How important is privacy? All banks should meet certain minimum privacy levels. But you give up a little of that if you have a regular bank you use. At my local credit union, for example, I tend to get the same teller quite often. She remembers a couple of past transactions because they were unusual. This doesn’t bother me, but I know it would bother some of my friends. If you need maximum privacy, take this into consideration.
Whichever account you choose, be sure that it’s FDIC insured. (Or, if it’s held at a credit union, that it’s insured through the NCUA.)
Conclusion Ten years ago I had a single bank account. Today I have five, including each of the above. (My fifth bank account is a business account.) Each account serves a purpose.
Picking a bank account is like choosing the right tool for a job. Sure, you can beat a nail into the wall with a screwdriver — if that’s all you have. But you’ll do it a lot faster and with more precision if you use a hammer. The same is true with money. Use the right tool and you’ll get better results.
How many bank accounts do you have? Do you try to keep things simple? Or do you spread your money around many accounts? Any tips or tricks to share with other GRS readers?
From the hustle and bustle of Union Square to the peaceful tranquility of small villages like Cold Spring, New York is a great pace to live and work. New York residents have plenty of options when it comes to financial institutions, including some of the best credit unions and community banks in the country. Our goal is to make finding the right bank easier with this list of the best banks and credit unions in New York.
11 Best Banks in New York
New York City is known for Wall Street, but there’s far more to New York than its financial center. No matter where you live in the state, you can choose to go with a credit union, regional bank, local bank, or the biggest bank in the country. Don’t rule out online banks, either, since many have competitive offerings.
Here’s our list of the 11 best banks and credit unions in New York to help you narrow it down to one solid option.
1. New York Community Bank
It may be a New York bank, but New York Community Bank is one of the largest banks in the country. NYCB’s parent company is New York Community Bancorp, Inc., which also owns Flagstar Bank and has branches in New York, New Jersey, Ohio, Florida, and Arizona.
You’ll get access to more than 56,000 ATMs through NYCB’s ATM network, which includes both Allpoint and Presto! machines nationwide. NYCB also offers great rates on CDs. You can get a 6-month CD that earns 4.50% APY or a 12-month CD with a rate of 4.25% APY.
Fees:
No monthly maintenance fees
No overdraft fees
Balance requirements:
$1 minimum deposit to open
ATMs:
Fee-free at New York Community Bank ATMs
Fee-free at Allpoint and Presto! ATMs nationwide
$2.50 fee for each out-of-network ATM transaction
Interest on balance:
Up to 4.50% APY on CDs
Additional perks:
2. Chime
Chime is a modern online banking service that features a wide array of benefits, including fee-free overdrafts up to $200, early direct deposit access, and no monthly fees or foreign transaction charges.
With Chime, you can also get a secured credit card to help boost your FICO Score® with no interest or annual fees. In addition, it allows for fee-free transfers and savings growth with an APY of 2.00%.
You also stay informed with daily balance notifications and transaction alerts. Safety is a priority with secure processes in place, FDIC insured funds up to $250,000, and round-the-clock support channels for any assistance required.
Fees:
No monthly service fees
No overdraft fees
Balance requirements:
No minimum opening deposit required
No minimum daily balance required
ATMs:
Fee-free at 60,000+ ATMs nationwide
$2.50 fee for out-of-network ATMs
Interest on balance:
2.00% APY on savings
Additional perks:
Secured credit card helps you build credit with no credit check required
SpotMe covers up to $200 in overdrafts
3. Chase Bank
National banks have plenty to offer, including expanded brick-and-mortar branches and a wide range of banking products. Chase Bank is one of the largest banks in the U.S., with branches and ATMs in 48 states and the District of Columbia.
Currently, Chase is offering a $200 bonus for its Chase Total Checking account. This account comes with a $12 monthly fee, but Chase will waive it if you receive at least $500 monthly in direct deposits, maintain a $1,500 daily balance, or have an average $500 daily balance across all your Chase accounts.
Fees:
$12 monthly fee (waived with requirements)
$34 overdraft fee
Balance requirements:
No deposit to open
No minimum balance requirement
ATMs:
Fee-free at 15,000+ Chase Bank ATMs nationwide
$3-$5 out-of-network ATM fee
Interest on balance:
0.01% APY on savings accounts
Up to 3.75% on CDs
Additional perks:
$200 bonus for new checking account
Bonus and 1.5% unlimited cash back on credit card
4. NBT Bank
Based in Norwich, New York, NBT Bank has branch locations in New York, Pennsylvania, Vermont, Massachusetts, New Hampshire, Maine, and Connecticut. You’ll find two checking accounts that don’t charge monthly fees.
Classic Checking includes unlimited check writing and is designed for those who prefer the experience that comes with traditional banks. NBT’s eChecking account has you managing everything. The biggest benefit to eChecking is that your balance earns interest.
Fees:
No monthly fees
$35 overdraft fee
Balance requirements:
No deposit to open
No minimum daily balance requirements
ATMs:
Fee-free at NBT Bank ATMs
$1.50 fee for out-of-network ATM withdrawals
Interest on balance:
0.01% APY on eChecking
Up to 0.03% APY on savings
Additional perks:
Competitive rates on loans
Multiple business checking accounts
5. Capital One
One of the top national banks in New York is Capital One, which has branches and cafés across the country. Although there are fewer branches these days, some locations have been turned into cafés with coffee and free Wi-Fi along with banking services. But wherever you are, chances are you’ll find a Capital One ATM. You can withdraw cash at any Capital One, MoneyPass, or Allpoint ATM nationwide.
Fees:
No monthly maintenance fees
No overdraft fee
Balance requirements:
No deposit to open
No minimum daily balance requirements
ATMs:
Fee-free at Capital One ATMs
Fee-free at any MoneyPass or Allpoint ATM
$2 fee for out-of-network ATM transactions
Interest on balance:
Up to 4.10% APY on savings
Up to 4.75% APY on CDs
Additional perks:
Cash deposits at any CVS location
Some branch locations have cafés and free Wi-Fi access
6. GO2bank
Online banks like GO2bank have their perks. You’ll often find competitive interest rates and low fees. However, mobile banking does have its limits, and that’s where GO2bank stands out.
You’ll not only be able to withdraw cash at any Allpoint ATM, but you can also deposit cash at more than 90,000 retailers across the country. As long as you’re okay with not having an in-person banking experience, GO2bank could be a solid option.
Fees:
$5 monthly fee (waived with requirements)
$15 overdraft fee
Balance requirements:
No opening deposit minimum
No minimum daily balance required
ATMs:
Fee-free at Allpoint ATMs nationwide
$3 fee for out-of-network ATM transactions
Interest on balance:
Up to 4.50% APY on savings
Additional perks:
Secured credit card helps you build credit with no credit check required
Deposit cash at 90,000+ retail locations nationwide
7. Santander Bank
Santander Bank is a regional bank with branch locations in New York, Connecticut, Delaware, Florida, Massachusetts, New Hampshire, New Jersey, Pennsylvania, and Rhode Island. The free checking account option is Simply Right Checking, which waives the $10 monthly fee as long as you have at least one activity on the account each month. This includes any deposit, withdrawal, transfer, or payment posted to the account within each calendar month.
Fees:
$10 monthly fee (waived with requirements)
$15 overdraft fee
Balance requirements:
$25 opening deposit
No minimum daily balance required
ATMs:
Fee-free at 2,000+ Santander Bank ATMs
$3 fee for out-of-network ATM transactions
Interest on balance:
0.03% APY on savings accounts
Up to 5.50% APY on CDs
Additional perks:
8. HSBC
HSBC isn’t just a national bank. It’s multinational, with locations across the U.S., as well as in Latin America, Europe, Africa, the Middle East, and Asia. This is a bank for high rollers, with a steep fee of $50 monthly if you don’t meet minimum requirements. Those requirements are either a $75,000 balance, monthly direct deposits of at least $5,000, or a residential mortgage loan of at least $500,000.
If you travel internationally, though, HSBC is worth considering since you can use your debit card at any ATM worldwide with no fees. HSBC also rebates up to five U.S. third-party ATM fees each month.
Fees:
$50 monthly fee (waived with requirements)
No overdraft fee
Balance requirements:
No minimum opening deposit
No minimum daily balance required ($5 to earn interest)
ATMs:
Fee-free at 55,000+ Allpoint ATMs nationwide
No fees for out-of-network ATM transactions
Up to five third-party U.S.-based ATM fees rebated monthly
Interest on balance:
0.01% APY on checking
Up to 4.15% APY on savings account
Up to 4.50% APY on CDs
Additional perks:
Unlimited rewards credit cards available
In-app support for international transactions
9. Corning Credit Union
Corning Credit Union membership is open to anyone who lives, works, worships, or attends school in Chemung County or Corning, New York. Membership is also open to residents of select areas in North Carolina, Pennsylvania, and South Carolina. The best thing about Corning Credit union is that its basic checking account earns 3.00% APY.
Fees:
No monthly fee
$32 overdraft fee
Balance requirements:
No minimum daily balance required
ATMs:
Fee-free at Corning Credit Union ATMs
$1 fee for out-of-network ATMs (waived for first four each month)
Interest on balance:
Up to 3.00% APY on checking
Up to 1.00% APY on savings
Up to 4.60% APY on share certificates
Additional perks:
Competitive rates on loans
Wide range of rewards-earning credit cards available
10. Dime Community Bank
If you run a business in the New York City or Long Island area, Dime Community Bank has plenty to offer. Dime’s business checking accounts come with a $12 monthly fee for up to 250 items, but Dime will waive it as long as you have an average daily balance of $10,000 each month.
Small business owners might find this on the high side, but if you have more than 250 items each month, that fee goes up to $25 with a balance requirement of $20,000 to waive it. But if you can meet the minimums, or you don’t mind the fee, you might like the extra services offered to members.
Fees:
$12 monthly fee (waived with requirements)
$35 overdraft fee
Balance requirements:
No minimum opening deposit required
ATMs:
Fee-free at Dime Community Bank ATMs
$1.50 fee for out-of-network ATMs
Interest on balance:
Rates not publicly disclosed
Additional perks:
Wide range of loans that serve small businesses
Access to legal, real estate, and accounting services
11. TD Bank
TD Bank is a national bank with hundreds of branches across New York. Although TD’s checking account comes with a $4.95 monthly fee, everything else is free, including overdrafts. One of this bank’s standout features, though, is its CD rates. Currently, you’ll get 5.00% APY on a six-month CD, with the option to bump up the rate if the market changes.
Fees:
$4.95 monthly fee
No overdraft fees
Balance requirements:
No minimum opening deposit required
No minimum daily balance required
ATMs:
Fee-free at 2,600+ TD Bank ATMs nationwide
$3 fee for out-of-network ATMs
Interest on balance:
Up to 3.51% APY on savings account
Up to 5.00% APY on CDs
Additional perks:
Live 24/7 customer service available online
Same-day replacement for lost debit card
Methodology
If you live in New York, chances are you know there’s no shortage of options. But we strove to create a list that brings together a little of everything. Not every customer wants the biggest bank, but plenty of customers would rather have a larger bank with a robust set of features. We combined small, local banks, credit unions, and large, corporate banks to ensure you can find the best bank for you.
Of course, it’s vital to make sure you’re going with a secure bank. We narrowed our list to those banks that had solid reputations and a history of serving New York residents. Beyond that, we made sure each bank offers savings accounts as well as checking, and we included a few that have features that would appeal to small business owners.
When you’re ready to open a bank account, it’s important to compare banks to make sure you’re getting the best rates. Many banks and credit unions can offer a great banking app and chat support, but you might prefer the personal touch you get with a local bank. Whatever your choice, pay close attention to fees and interest rates to ensure you’re getting the best deal for parking your money.
In Best Low-Risk Investments for 2023, I provided a comprehensive list of low-risk investments with predictable returns. But it’s precisely because those returns are low-risk that they also provide relatively low returns.
In this article, we’re going to look at high-yield investments, many of which involve a higher degree of risk but are also likely to provide higher returns.
True enough, low-risk investments are the right investment solution for anyone who’s looking to preserve capital and still earn some income.
But if you’re more interested in the income side of an investment, accepting a bit of risk can produce significantly higher returns. And at the same time, these investments will generally be less risky than growth stocks and other high-risk/high-reward investments.
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Determine How Much Risk You’re Willing to Take On
The risk we’re talking about with these high-yield investments is the potential for you to lose money. As is true when investing in any asset, you need to begin by determining how much you’re willing to risk in the pursuit of higher returns.
Chasing “high-yield returns” will make you broke if you don’t have clear financial goals you’re working towards.
I’m going to present a large number of high-yield investments, each with its own degree of risk. The purpose is to help you evaluate the risk/reward potential of these investments when selecting the ones that will be right for you.
If you’re looking for investments that are completely safe, you should favor one or more of the highly liquid, low-yield vehicles covered in Best Low-Risk Investments for 2023. In this article, we’re going to be going for something a little bit different. As such, please note that this is not in any way a blanket recommendation of any particular investment.
Best High-Yield Investments for 2023
Table of Contents
Below is my list of the 18 best high-yield investments for 2023. They’re not ranked or listed in order of importance. That’s because each is a unique investment class that you will need to carefully evaluate for suitability within your own portfolio.
Be sure that any investment you do choose will be likely to provide the return you expect at an acceptable risk level for your own personal risk tolerance.
1. Treasury Inflation-Protected Securities (TIPS)
Let’s start with this one, if only because it’s on just about every list of high-yield investments, especially in the current environment of rising inflation. It may not actually be the best high-yield investment, but it does have its virtues and shouldn’t be overlooked.
Basically, TIPS are securities issued by the U.S. Treasury that are designed to accommodate inflation. They do pay regular interest, though it’s typically lower than the rate paid on ordinary Treasury securities of similar terms. The bonds are available with a minimum investment of $100, in terms of five, 10, and 30 years. And since they’re fully backed by the U.S. government, you are assured of receiving the full principal value if you hold a security until maturity.
But the real benefit—and the primary advantage—of these securities is the inflation principal additions. Each year, the Treasury will add an amount to the bond principal that’s commensurate with changes in the Consumer Price Index (CPI).
Fortunately, while the principal will be added when the CPI rises (as it nearly always does), none will be deducted if the index goes negative.
You can purchase TIPS through the U.S. Treasury’s investment portal, Treasury Direct. You can also hold the securities as well as redeem them on the same platform. There are no commissions or fees when buying securities.
On the downside, TIPS are purely a play on inflation since the base rates are fairly low. And while the principal additions will keep you even with inflation, you should know that they are taxable in the year received.
Still, TIPS are an excellent low-risk, high-yield investment during times of rising inflation—like now.
2. I Bonds
If you’re looking for a true low-risk, high-yield investment, look no further than Series I bonds. With the current surge in inflation, these bonds have become incredibly popular, though they are limited.
I bonds are currently paying 6.89%. They can be purchased electronically in denominations as little as $25. However, you are limited to purchasing no more than $10,000 in I bonds per calendar year. Since they are issued by the U.S. Treasury, they’re fully protected by the U.S. government. You can purchase them through the Treasury Department’s investment portal, TreasuryDirect.gov.
“The cash in my savings account is on fire,” groans Scott Lieberman, Founder of Touchdown Money. “Inflation has my money in flames, each month incinerating more and more. To defend against this, I purchased an I bond. When I decide to get my money back, the I bond will have been protected against inflation by being worth more than what I bought it for. I highly recommend getting yourself a super safe Series I bond with money you can stash away for at least one year.”
You may not be able to put your entire bond portfolio into Series I bonds. But just a small investment, at nearly 10%, can increase the overall return on your bond allocation.
3. Corporate Bonds
The average rate of return on a bank savings account is 0.33%. The average rate on a money market account is 0.09%, and 0.25% on a 12-month CD.
Now, there are some banks paying higher rates, but generally only in the 1%-plus range.
If you want higher returns on your fixed income portfolio, and you’re willing to accept a moderate level of risk, you can invest in corporate bonds. Not only do they pay higher rates than banks, but you can lock in those higher rates for many years.
For example, the average current yield on a AAA-rated corporate bond is 4.55%. Now that’s the rate for AAA bonds, which are the highest-rated securities. You can get even higher rates on bonds with lower ratings, which we will cover in the next section.
Corporate bonds sell in face amounts of $1,000, though the price may be higher or lower depending on where interest rates are. If you choose to buy individual corporate bonds, expect to buy them in lots of ten. That means you’ll likely need to invest $10,000 in a single issue. Brokers will typically charge a small per-bond fee on purchase and sale.
An alternative may be to take advantage of corporate bond funds. That will give you an opportunity to invest in a portfolio of bonds for as little as the price of one share of an ETF. And because they are ETFs, they can usually be bought and sold commission free.
You can typically purchase corporate bonds and bond funds through popular stock brokers, like Zacks Trade, TD Ameritrade.
Corporate Bond Risk
Be aware that the value of corporate bonds, particularly those with maturities greater than 10 years, can fall if interest rates rise. Conversely, the value of the bonds can rise if interest rates fall.
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4. High-Yield Bonds
In the previous section we talked about how interest rates on corporate bonds vary based on each bond issue’s rating. A AAA bond, being the safest, has the lowest yield. But a riskier bond, such as one rated BBB, will provide a higher rate of return.
If you’re looking to earn higher interest than you can with investment-grade corporate bonds, you can get those returns with so-called high-yield bonds. Because they have a lower rating, they pay higher interest, sometimes much higher.
The average yield on high-yield bonds is 8.29%. But that’s just an average. The yield on a bond rated B will be higher than one rated BB.
You should also be aware that, in addition to potential market value declines due to rising interest rates, high-yield bonds are more likely to default than investment-grade bonds. That’s why they pay higher interest rates. (They used to call these bonds “junk bonds,” but that kind of description is a marketing disaster.) Because of those twin risks, junk bonds should occupy only a small corner of your fixed-income portfolio.
High Yield Bond Risk
In a rapidly rising interest rate environment, high-yield bonds are more likely to default.
High-yield bonds can be purchased under similar terms and in the same places where you can trade corporate bonds. There are also ETFs that specialize in high-yield bonds and will be a better choice for most investors, since they will include diversification across many different bond issues.
5. Municipal Bonds
Just as corporations and the U.S. Treasury issue bonds, so do state and local governments. These are referred to as municipal bonds. They work much like other bond types, particularly corporates. They can be purchased in similar denominations through online brokers.
The main advantage enjoyed by municipal bonds is their tax-exempt status for federal income tax purposes. And if you purchase a municipal bond issued by your home state, or a municipality within that state, the interest will also be tax-exempt for state income tax purposes.
That makes municipal bonds an excellent source of tax-exempt income in a nonretirement account. (Because retirement accounts are tax-sheltered, it makes little sense to include municipal bonds in those accounts.)
Municipal bond rates are currently hovering just above 3% for AAA-rated bonds. And while that’s an impressive return by itself, it masks an even higher yield.
Because of their tax-exempt status, the effective yield on municipal bonds will be higher than the note rate. For example, if your combined federal and state marginal income tax rates are 25%, the effective yield on a municipal bond paying 3% will be 4%. That gives an effective rate comparable with AAA-rated corporate bonds.
Municipal bonds, like other bonds, are subject to market value fluctuations due to interest rate changes. And while it’s rare, there have been occasional defaults on these bonds.
Like corporate bonds, municipal bonds carry ratings that affect the interest rates they pay. You can investigate bond ratings through sources like Standard & Poor’s, Moody’s, and Fitch.
Fund
Symbol
Type
Current Yield
5 Average Annual Return
Vanguard Inflation-Protected Securities Fund
VIPSX
TIPS
0.06%
3.02%
SPDR® Portfolio Interm Term Corp Bond ETF
SPIB
Corporate
4.38%
1.44%
iShares Interest Rate Hedged High Yield Bond ETF
HYGH
High-Yield
5.19%
2.02%
Invesco VRDO Tax-Free ETF (PVI)
PVI
Municipal
0.53%
0.56%
6. Longer Term Certificates of Deposit (CDs)
This is another investment that falls under the low risk/relatively high return classification. As interest rates have risen in recent months, rates have crept up on certificates of deposit. Unlike just one year ago, CDs now merit consideration.
But the key is to invest in certificates with longer terms.
“Another lower-risk option is to consider a Certificate of Deposit (CD),” advises Lance C. Steiner, CFP at Buckingham Advisors. “Banks, credit unions, and many other financial institutions offer CDs with maturities ranging from 6 months to 60 months. Currently, a 6-month CD may pay between 0.75% and 1.25% where a 24-month CD may pay between 2.20% and 3.00%. We suggest considering a short-term ladder since interest rates are expected to continue rising.” (Stated interest rates for the high-yield savings and CDs were obtained at bankrate.com.)
Most banks offer certificates of deposit with terms as long as five years. Those typically have the highest yields.
But the longer term does involve at least a moderate level of risk. If you invest in a CD for five years that’s currently paying 3%, the risk is that interest rates will continue rising. If they do, you’ll miss out on the higher returns available on newer certificates. But the risk is still low overall since the bank guarantees to repay 100% of your principle upon certificate maturity.
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7. Peer-to-Peer (P2P) Lending
Do you know how banks borrow from you—at 1% interest—then loan the same money to your neighbor at rates sometimes as high as 20%? It’s quite a racket, and a profitable one at that.
But do you also know that you have the same opportunity as a bank? It’s an investing process known as peer-to-peer lending, or P2P for short.
P2P lending essentially eliminates the bank. As an investor, you’ll provide the funds for borrowers on a P2P platform. Most of these loans will be in the form of personal loans for a variety of purposes. But some can also be business loans, medical loans, and for other more specific purposes.
As an investor/lender, you get to keep more of the interest rate return on those loans. You can invest easily through online P2P platforms.
One popular example is Prosper. They offer primarily personal loans in amounts ranging between $2,000 and $40,000. You can invest in small slivers of these loans, referred to as “notes.” Notes can be purchased for as little as $25.
That small denomination will make it possible to diversify your investment across many different loans. You can even choose the loans you will invest in based on borrower credit scores, income, loan terms, and purposes.
Prosper, which has managed $20 billion in P2P loans since 2005, claims a historical average return of 5.7%. That’s a high rate of return on what is essentially a fixed-income investment. But that’s because there exists the possibility of loss due to borrower default.
However, you can minimize the likelihood of default by carefully choosing borrower loan quality. That means focusing on borrowers with higher credit scores, incomes, and more conservative loan purposes (like debt consolidation).
8. Real Estate Investment Trusts (REITs)
REITs are an excellent way to participate in real estate investment, and the return it provides, without large amounts of capital or the need to manage properties. They’re publicly traded, closed-end investment funds that can be bought and sold on major stock exchanges. They invest primarily in commercial real estate, like office buildings, retail space, and large apartment complexes.
If you’re planning to invest in a REIT, you should be aware that there are three different types.
“Equity REITs purchase commercial, industrial, or residential real estate properties,” reports Robert R. Johnson, PhD, CFA, CAIA, Professor of Finance, Heider College of Business, Creighton University and co-author of several books, including The Tools and Techniques Of Investment Planning, Strategic Value Investing and Investment Banking for Dummies. “Income is derived primarily from the rental on the properties, as well as from the sale of properties that have increased in value. Mortgage REITs invest in property mortgages. The income is primarily from the interest they earn on the mortgage loans. Hybrid REITs invest both directly in property and in mortgages on properties.”
Johnson also cautions:
“Investors should understand that equity REITs are more like stocks and mortgage REITs are more like bonds. Hybrid REITs are like a mix of stocks and bonds.”
Mortgage REITs, in particular, are an excellent way to earn steady dividend income without being closely tied to the stock market.
Examples of specific REITs are listed in the table below (source: Kiplinger):
REIT
Equity or Mortgage
Property Type
Dividend Yield
12 Month Return
Rexford Industrial Realty
REXR
Industrial warehouse space
2.02%
2.21%
Sun Communities
SUI
Manufactured housing, RVs, resorts, marinas
2.19%
-14.71%
American Tower
AMT
Multi-tenant cell towers
2.13%
-9.00%
Prologis
PLD
Industrial real estate
2.49%
-0.77%
Camden Property Trust
CPT
Apartment complexes
2.77%
-7.74%
Alexandria Real Estate Equities
ARE
Research Properties
3.14%
-23.72%
Digital Realty Trust
DLR
Data centers
3.83%
-17.72%
9. Real Estate Crowdfunding
If you prefer direct investment in a property of your choice, rather than a portfolio, you can invest in real estate crowdfunding. You invest your money, but management of the property will be handled by professionals. With real estate crowdfunding, you can pick out individual properties, or invest in nonpublic REITs that invest in very specific portfolios.
One of the best examples of real estate crowdfunding is Fundrise. That’s because you can invest with as little as $500 or create a customized portfolio with no more than $1,000. Not only does Fundrise charge low fees, but they also have multiple investment options. You can start small in managed investments, and eventually trade up to investing in individual deals.
One thing to be aware of with real estate crowdfunding is that many require accredited investor status. That means being high income, high net worth, or both. If you are an accredited investor, you’ll have many more choices in the real estate crowdfunding space.
If you are not an accredited investor, that doesn’t mean you’ll be prevented from investing in this asset class. Part of the reason why Fundrise is so popular is that they don’t require accredited investor status. There are other real estate crowdfunding platforms that do the same.
Just be careful if you want to invest in real estate through real estate crowdfunding platforms. You will be expected to tie your money up for several years, and early redemption is often not possible. And like most investments, there is the possibility of losing some or all your investment principal.
Low minimum investment – $10
Diversified real estate portfolio
Portfolio Transparency
10. Physical Real Estate
We’ve talked about investing in real estate through REITs and real estate crowdfunding. But you can also invest directly in physical property, including residential property or even commercial.
Owning real estate outright means you have complete control over the investment. And since real estate is a large-dollar investment, the potential returns are also large.
For starters, average annual returns on real estate are impressive. They’re even comparable to stocks. Residential real estate has generated average returns of 10.6%, while commercial property has returned an average of 9.5%.
Next, real estate has the potential to generate income from two directions, from rental income and capital gains. But because of high property values in many markets around the country, it will be difficult to purchase real estate that will produce a positive cash flow, at least in the first few years.
Generally speaking, capital gains are where the richest returns come from. Property purchased today could double or even triple in 20 years, creating a huge windfall. And this will be a long-term capital gain, to get the benefit of a lower tax bite.
Finally, there’s the leverage factor. You can typically purchase an investment property with a 20% down payment. That means you can purchase a $500,000 property with $100,000 out-of-pocket.
By calculating your capital gains on your upfront investment, the returns are truly staggering. If the $500,000 property doubles to $1 million in 20 years, the $500,000 profit generated will produce a 500% gain on your $100,000 investment.
On the negative side, real estate is certainly a very long-term investment. It also comes with high transaction fees, often as high as 10% of the sale price. And not only will it require a large down payment up front, but also substantial investment of time managing the property.
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11. High Dividend Stocks
“The best high-yield investment is dividend stocks,” declares Harry Turner, Founder at The Sovereign Investor. “While there is no guaranteed return with stocks, over the long term stocks have outperformed other investments such as bonds and real estate. Among stocks, dividend-paying stocks have outperformed non-dividend paying stocks by more than 2 percentage points per year on average over the last century. In addition, dividend stocks tend to be less volatile than non-dividend paying stocks, meaning they are less likely to lose value in downturns.”
You can certainly invest in individual stocks that pay high dividends. But a less risky way to do it, and one that will avoid individual stock selection, is to invest through a fund.
One of the most popular is the ProShares S&P 500 Dividend Aristocrat ETF (NOBL). It has provided a return of 1.67% in the 12 months ending May 31, and an average of 12.33% per year since the fund began in October 2013. The fund currently has a 1.92% dividend yield.
The so-called Dividend Aristocrats are popular because they represent 60+ S&P 500 companies, with a history of increasing their dividends for at least the past 25 years.
“Dividend Stocks are an excellent way to earn some quality yield on your investments while simultaneously keeping inflation at bay,” advises Lyle Solomon, Principal Attorney at Oak View Law Group, one of the largest law firms in America. “Dividends are usually paid out by well-established and successful companies that no longer need to reinvest all of the profits back into the business.”
It gets better. “These companies and their stocks are safer to invest in owing to their stature, large customer base, and hold over the markets,” adds Solomon. “The best part about dividend stocks is that many of these companies increase dividends year on year.”
The table below shows some popular dividend-paying stocks. Each is a so-called “Dividend Aristocrat”, which means it’s part of the S&P 500 and has increased its dividend in each of at least the past 25 years.
Company
Symbol
Dividend
Dividend Yield
AbbVie
ABBV
$5.64
3.80%
Armcor PLC
AMCR
$0.48
3.81%
Chevron
CVX
$5.68
3.94%
ExxonMobil
XOM
$3.52
4.04%
IBM
IBM
$6.60
5.15%
Realty Income Corp
O
$2.97
4.16%
Walgreen Boots Alliance
WBA
$1.92
4.97%
12. Preferred Stocks
Preferred stocks are a very specific type of dividend stock. Just like common stock, preferred stock represents an interest in a publicly traded company. They’re often thought of as something of a hybrid between stocks and bonds because they contain elements of both.
Though common stocks can pay dividends, they don’t always. Preferred stocks on the other hand, always pay dividends. Those dividends can be either a fixed amount or based on a variable dividend formula. For example, a company can base the dividend payout on a recognized index, like the LIBOR (London Inter-Bank Offered Rate). The percentage of dividend payout will then change as the index rate does.
Preferred stocks have two major advantages over common stock. First, as “preferred” securities, they have a priority on dividend payments. A company is required to pay their preferred shareholders dividends ahead of common stockholders. Second, preferred stocks have higher dividend yields than common stocks in the same company.
You can purchase preferred stock through online brokers, some of which are listed under “Growth Stocks” below.
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Preferred Stock Caveats
The disadvantage of preferred stocks is that they don’t entitle the holder to vote in corporate elections. But some preferred stocks offer a conversion option. You can exchange your preferred shares for a specific number of common stock shares in the company. Since the conversion will likely be exercised when the price of the common shares takes a big jump, there’s the potential for large capital gains—in addition to the higher dividend.
Be aware that preferred stocks can also be callable. That means the company can authorize the repurchase of the stock at its discretion. Most will likely do that at a time when interest rates are falling, and they no longer want to pay a higher dividend on the preferred stock.
Preferred stock may also have a maturity date, which is typically 30–40 years after its original issuance. The company will typically redeem the shares at the original issue price, eliminating the possibility of capital gains.
Not all companies issue preferred stock. If you choose this investment, be sure it’s with a company that’s well-established and has strong financials. You should also pay close attention to the details of the issuance, including and especially any callability provisions, dividend formulas, and maturity dates.
13. Growth Stocks
This sector is likely the highest risk investment on this list. But it also may be the one with the highest yield, at least over the long term. That’s why we’re including it on this list.
Based on the S&P 500 index, stocks have returned an average of 10% per year for the past 50 years. But it is important to realize that’s only an average. The market may rise 40% one year, then fall 20% the next. To be successful with this investment, you must be committed for the long haul, up to and including several decades.
And because of the potential wide swings, growth stocks are not recommended for funds that will be needed within the next few years. In general, growth stocks work best for retirement plans. That’s where they’ll have the necessary decades to build and compound.
Since most of the return on growth stocks is from capital gains, you’ll get the benefit of lower long-term capital gains tax rates, at least with securities held in a taxable account. (The better news is capital gains on investments held in retirement accounts are tax-deferred until retirement.)
You can choose to invest in individual stocks, but that’s a fairly high-maintenance undertaking. A better way may be to simply invest in ETFs tied to popular indexes. For example, ETFs based on the S&P 500 are very popular among investors.
You can purchase growth stocks and growth stock ETFs commission free with brokers like M1 Finance, Zacks Trade, Wealthsimple.
14. Annuities
Annuities are something like creating your own private pension. It’s an investment contract you take with an insurance company, in which you invest a certain amount of money in exchange for a specific income stream. They can be an excellent source of high yields because the return is locked in by the contract.
Annuities come in many different varieties. Two major classifications are immediate and deferred annuities. As the name implies, immediate annuities begin paying an income stream shortly after the contract begins.
Deferred annuities work something like retirement plans. You may deposit a fixed amount of money with the insurance company upfront or make regular installments. In either case, income payments will begin at a specified point in the future.
With deferred annuities, the income earned within the plan is tax-deferred and paid upon withdrawal. But unlike retirement accounts, annuity contributions are not tax-deductible. Investment returns can either be fixed-rate or variable-rate, depending on the specific annuity setup.
While annuities are an excellent idea and concept, the wide variety of plans as well as the many insurance companies and agents offering them, make them a potential minefield. For example, many annuities are riddled with high fees and are subject to limited withdrawal options.
Because they contain so many moving parts, any annuity contracts you plan to enter into should be carefully reviewed. Pay close attention to all the details, including the small ones. It is, after all, a contract, and therefore legally binding. For that reason, you may want to have a potential annuity reviewed by an attorney before finalizing the deal.
15. Alternative Investments
Alternative investments cover a lot of territory. Examples include precious metals, commodities, private equity, art and collectibles, and digital assets. These fall more in the category of high risk/potential high reward, and you should proceed very carefully and with only the smallest slice of your portfolio.
To simplify the process of selecting alternative assets, you can invest through platforms such as Yieldstreet. With a single cash investment, you can invest in multiple alternatives.
“Investors can purchase real estate directly on Yieldstreet, through fractionalized investments in single deals,” offers Milind Mehere, Founder & Chief Executive Officer at Yieldstreet. “Investors can access private equity and private credit at high minimums by investing in a private market fund (think Blackstone or KKR, for instance). On Yieldstreet, they can have access to third-party funds at a fraction of the previously required minimums. Yieldstreet also offers venture capital (fractionalized) exposure directly. Buying a piece of blue-chip art can be expensive, and prohibitive for most investors, which is why Yieldstreet offers fractionalized assets to diversified art portfolios.”
Yieldstreet also provides access to digital asset investments, with the benefit of allocating to established professional funds, such as Pantera or Osprey Fund. The platform does not currently offer commodities but plans to do so in the future.
Access to wide array of alternative asset classes
Access to ultra-wealthy investments
Can invest for income or growth
Learn More Now
Alternative investments largely require thinking out-of-the-box. Some of the best investment opportunities are also the most unusual.
“The price of meat continues to rise, while agriculture remains a recession-proof investment as consumer demand for food is largely inelastic,” reports Chris Rawley, CEO of Harvest Returns, a platform for investing in private agriculture companies. “Consequently, investors are seeing solid returns from high-yield, grass-fed cattle notes.”
16. Interest Bearing Crypto Accounts
Though the primary appeal of investing in cryptocurrency has been the meteoric rises in price, now that the trend seems to be in reverse, the better play may be in interest-bearing crypto accounts. A select group of crypto exchanges pays high interest on your crypto balance.
One example is Gemini. Not only do they provide an opportunity to buy, sell, and store more than 100 cryptocurrencies—plus non-fungible tokens (NFTs)—but they are currently paying 8.05% APY on your crypto balance through Gemini Earn.
In another variation of being able to earn money on crypto, Crypto.com pays rewards of up to 14.5% on crypto held on the platform. That’s the maximum rate, as rewards vary by crypto. For example, rewards on Bitcoin and Ethereum are paid at 6%, while stablecoins can earn 8.5%.
It’s important to be aware that when investing in cryptocurrency, you will not enjoy the benefit of FDIC insurance. That means you can lose money on your investment. But that’s why crypto exchanges pay such high rates of return, whether it’s in the form of interest or rewards.
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17. Crypto Staking
Another way to play cryptocurrency is a process known as crypto staking. This is where the crypto exchange pays you a certain percentage as compensation or rewards for monitoring a specific cryptocurrency. This is not like crypto mining, which brings crypto into existence. Instead, you’ll participate in writing that particular blockchain and monitoring its security.
“Crypto staking is a concept wherein you can buy and lock a cryptocurrency in a protocol, and you will earn rewards for the amount and time you have locked the cryptocurrency,” reports Oak View Law Group’s Lyle Solomon.
“The big downside to staking crypto is the value of cryptocurrencies, in general, is extremely volatile, and the value of your staked crypto may reduce drastically,” Solomon continues, “However, you can stake stable currencies like USDC, which have their value pegged to the U.S. dollar, and would imply you earn staked rewards without a massive decrease in the value of your investment.”
Much like earning interest and rewards on crypto, staking takes place on crypto exchanges. Two exchanges that feature staking include Coinbase and Kraken. These are two of the largest crypto exchanges in the industry, and they provide a wide range of crypto opportunities, in addition to staking.
Invest in Startup Businesses and Companies
Have you ever heard the term “angel investor”? That’s a private investor, usually, a high net worth individual, who provides capital to small businesses, often startups. That capital is in the form of equity. The angel investor invests money in a small business, becomes a part owner of the company, and is entitled to a share of the company’s earnings.
In most cases, the angel investor acts as a silent partner. That means he or she receives dividend distributions on the equity invested but doesn’t actually get involved in the management of the company.
It’s a potentially lucrative investment opportunity because small businesses have a way of becoming big businesses. As they grow, both your equity and your income from the business also grow. And if the business ever goes public, you could be looking at a life-changing windfall!
Easy Ways to Invest in Startup Businesses
Mainvest is a simple, easy way to invest in small businesses. It’s an online investment platform where you can get access to returns as high as 25%, with an investment of just $100. Mainvest offers vetted businesses (the acceptance rate is just 5% of business that apply) for you to invest in.
It collects revenue, which will be paid to you quarterly. And because the minimum required investment is so small, you can invest in several small businesses at the same time. One of the big advantages with Mainvest is that you are not required to be an accredited investor.
Still another opportunity is through Fundrise Innovation Fund. I’ve already covered how Fundrise is an excellent real estate crowdfunding platform. But through their recently launched Innovaton Fund, you’ll have opportunity to invest in high-growth private technology companies. As a fund, you’ll invest in a portfolio of late-stage tech companies, as well as some public equities.
The purpose of the fund is to provide high growth, and the fund is currently offering shares with a net asset value of $10. These are long-term investments, so you should expect to remain invested for at least five years. But you may receive dividends in the meantime.
Like Mainvest, the Fundrise Innovation Fund does not require you to be an accredited investor.
Low minimum investment – $10
Diversified real estate portfolio
Portfolio Transparency
Final Thoughts on High Yield Investing
Notice that I’ve included a mix of investments based on a combination of risk and return. The greater the risk associated with the investment, the higher the stated or expected return will be.
It’s important when choosing any of these investments that you thoroughly assess the risk involved with each, and not focus primarily on return. These are not 100% safe investments, like short-term CDs, short-term Treasury securities, savings accounts, or bank money market accounts.
Because there is risk associated with each, most are not suitable as short-term investments. They make most sense for long-term investment accounts, particularly retirement accounts.
For example, growth stocks—and most stocks, for that matter—should generally be in a retirement account. While there will be years when you will suffer losses in your position, you’ll have enough years to offset those losses between now and retirement.
Also, if you don’t understand any of the above investments, it will be best to avoid making them. And for more complicated investments, like annuities, you should consult with a professional to evaluate the suitability and all the provisions it contains.
FAQ’s on High Yield Investment Options
What investment has the highest yield?
The investment with the highest yield will vary depending on a number of factors, including current market conditions and the amount of risk an investor is willing to take on. Generally speaking, investments with the potential for high yields also come with a higher level of risk, so it’s important for investors to carefully consider their options and choose investments that align with their financial goals and risk tolerance.
Some examples of high-yield investments include:
1. Stocks: Some stocks may offer high dividend yields, which is the annual dividend payment a company makes to its shareholders, expressed as a percentage of the stock’s current market price.
2. Real estate: Investing in real estate, either directly by purchasing property or indirectly through a real estate investment trust (REIT), can potentially generate high returns in the form of rental income and appreciation of the property value.
3. High-yield bonds: High-yield bonds, also known as junk bonds, are bonds that are issued by companies with lower credit ratings and thus offer higher yields to compensate for the added risk.
4. Private lending: Investing in private loans, such as through peer-to-peer lending platforms, can potentially offer high yields, but it also carries a higher level of risk.
5. Commodities: Investing in commodities, such as precious metals or oil, can potentially generate high returns if the prices of those commodities rise. However, the prices of commodities can also be volatile and subject to market fluctuations.
It’s important to note that these are just examples and not recommendations. As with any investment, it’s crucial to carefully research and consider all the potential risks and rewards before making a decision.
Where can I invest my money to get high returns?
There are a number of places you can invest your money to get high returns. One option is to invest in stocks, which typically offer higher returns than other investment options. Another option is to invest in bonds, which are considered a relatively safe investment option.
You could also invest in real estate, which has the potential to provide high returns if done correctly. Finally, you could also invest in commodities, such as gold or silver, which can be a risky investment but can also offer high returns.
What investments can I make a 10% return?
It’s difficult to predict exactly what investments will generate a 10% return, as investment returns can vary depending on a number of factors, including market conditions and the performance of the specific investment. Some investments, such as stocks and real estate, have the potential to generate returns in excess of 10%, but they also come with a higher level of risk. It’s important to remember that past performance is not necessarily indicative of future results, and that all investments carry some degree of risk
Opening a certificate of deposit (CD) account is one way to save for short- or long-term financial goals. You can deposit money, then earn interest for a set term until the CD maturity date rolls around.
At that point, you’ll have to decide whether to continue saving or withdraw the money. Your bank may renew the CD automatically if you don’t specify what you’d like to do with the account.
Understanding CD maturity options (and there are several) can help you decide what to do with your savings once the term ends. Here, learn more about:
• What happens when a CD matures
• What you can do with your CD when it matures
• What to do if you miss the grace period to withdraw funds
• What are the tax implications when a CD matures
What Can I Do When My CD Matures?
A certificate of deposit is a time deposit account. That means you make an initial deposit which earns interest over a set maturity term. You’re typically not able to make additional deposits to your CD, though some banks offer what are known as add-on CDs that allow you to do so.
You are not supposed to withdraw any or all of the funds until the CD matures; you’ve committed to keeping your cash there. That’s why CDs may pay a higher annual percentage yield (APY) than a conventional savings account.
Early withdrawal can trigger penalties, though there are some penalty-free CDs available, typically at a lower interest rate.
So what happens when a CD matures? It largely depends on your preferences, but there are four main possibilities for handling a CD once it reaches maturity.
Deposit It Into a Different Bank Account
If your financial goals have changed or you’d just like more liquidity when it comes to your savings, you could deposit CD funds into a bank account. For example, savings accounts and money market accounts are two types of deposit accounts that can earn interest.
You might deposit funds at the same bank or at a different bank if you’re able to find a higher rate for savings accounts elsewhere. Or you may choose to put your CD savings into checking if you were saving for a specific purchase and the time has come to spend that money.
Quick Money Tip: If you’re saving for a short-term goal — whether it’s a vacation, a wedding, or the down payment on a house — consider opening a high-yield savings account. The higher APY that you’ll earn will help your money grow faster, but the funds stay liquid, so they are easy to access when you reach your goal.
Deposit It Into a New CD
Another option is to continue saving with a new CD. You might prefer a certificate of deposit vs. savings account if you know that you won’t need the money prior to the CD maturity date.
Otherwise, you could end up paying a CD withdrawal penalty, as noted above, if you need to break into the new CD before it matures. The penalty for withdrawing money from a CD early can vary from bank to bank but it could cause you to forfeit a significant portion of the interest earned.
Automatically Renew the CD
Banks can renew CDs automatically if the account owner doesn’t specify that they’d like to make a withdrawal at maturity. In that case, your initial deposit and the interest you’ve earned would be moved into a new CD that would begin a new maturity term of similar length. The interest rate might be different, however, if rates have increased or decreased since you initially opened the account.
Continuing to save in CDs (or a savings account) can keep your money safe. When accounts are held at a FDIC-member bank, they’re protected up to $250,000 per depositor, per account ownership type, per financial institution by the Federal Deposit Insurance Corporation. If you choose to have a CD at an insured credit union, NCUA (the National Credit Union Administration) will provide similar insurance. So if you’re wondering, “Can CDs lose money?” fear not. You can rest assured knowing your savings are covered.
A point worth noting: When you invest in CDs, their security can make them a good way to balance out your holdings. They can be a wise move if you have some funds in the stock market or other more volatile uninsured investments.
Withdraw CD Savings In Cash
A fourth option is to withdraw your CD savings in cash. That might make sense if you need the money to pay for a large purchase. For example, if you were using a CD to save money so you could buy a car, you might use the proceeds to cover the cost.
How Long Do I Have to Withdraw My CD?
Banks typically offer a grace period for CDs which allows you time to decide what you’d like to do with the money at maturity. The CD grace period is usually around 10 days (say, one to two weeks), and the clock starts ticking on the day the CD matures.
Your bank should notify you in advance that your CD maturity date is approaching so you have time to weigh your options. You may also be able to find your CD maturity date by logging in to your account or reviewing your account agreement.
It’s important to keep track of CD maturity dates, especially if you have multiple CDs with varying terms. For example, you might build a CD ladder that features five CDs with maturity terms spaced three, six, nine, 12 and 18 months apart. Being aware of the dates and grace periods can help you plan in advance which of the maturity options mentioned earlier you’d like to choose.
What Happens If I Miss the Grace Period to Withdraw?
Once the CD grace period window closes, you’ll generally have to wait until maturity to make a withdrawal. As mentioned, banks can impose an early withdrawal penalty if you take money from a CD ahead of schedule.
The penalty may be a flat fee, but it’s more common for the fee to be assessed as a certain number of days of interest. The longer the maturity term, the steeper the penalty usually ends up being. For example, you might have to pay three months’ worth of interest for withdrawing money early from a 6-month CD but that might get bumped up to a year’s worth for a 5-year CD.
There is one way to get around that. If your bank offers a no-penalty CD, you’d be able to withdraw money at any time during the maturity term without paying an early withdrawal fee. There is something of a trade-off, however, since no-penalty CDs typically offer lower interest rates than regular CDs.
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Things to Think About When Your CD Matures
If you have one or more CDs that are approaching maturity, it’s important to have a game plan when deciding what to do with them. Otherwise, you could end up locked in to a new CD which may not be what you want or need.
Here are a few things to consider when weighing your CD maturity options:
• Do I need the money right now?
• Could I get a better rate by moving the money to a new CD or savings account elsewhere?
• If I let the CD renew automatically, how much of a penalty would I pay if I decide to withdraw the money early later on?
• Would it make more sense to keep the money in a savings account so that it’s more accessible if I end up needing it?
• If I have multiple CDs in a CD ladder, does it make sense to roll the money into a new CD “rung” or use the funds for something else?
Thinking about your financial goals and your current needs can help you figure out which option might work best for your situation.
What Are the Tax Implications Once a CD Matures?
Here’s one more question you might have about CD maturity: Are CDs taxable? The short answer is yes. Interest earned from CDs is considered taxable interest income by the IRS if the amount exceeds $10. That rule applies whether the bank renews the CD, you deposit the money into a new CD or savings account yourself, or withdraw the money in cash. If you have a CD and it accrues more than $10 in interest, those earnings are taxable.
Your bank should send you a Form 1099-INT in January showing all the interest income earned from CDs (or other deposit accounts) for the previous year. You’ll need to hang onto this form since you’ll need it to file taxes. And if you’re tempted to just “forget” about reporting CD interest, remember that the bank sends a copy of your 1099-INT to the IRS, too.
The Takeaway
CDs can help you grow your money until you need to spend it. Assuming your goals line up with your CD maturity dates, that shouldn’t be an issue.
On the other hand, you might prefer to keep some of your money in a savings account so you have flexible access. When you open an account with SoFi, you can get Checking and Savings (and the ability to spend and stash your cash) in one convenient place. You’ll earn a competitive APY on balances, and you won’t pay any of the usual account fees. Those are two features that can really help your money grow and work harder for you!
Better banking is here with up to 4.20% APY on SoFi Checking and Savings.
FAQ
Which should you do when your CD matures?
When a CD matures, you can roll it into a new CD, deposit the funds into a savings account, allow the CD to renew, or withdraw the money in cash. The option that makes the most sense for you can depend on your financial goals and whether you have an immediate need for the money.
Do you have to pay taxes when your CD matures?
Interest earned on CDs is taxable. Your bank will issue you a Form 1099-INT in January showing the interest earned for the previous year. You’ll need to keep that form so you can report the interest earnings when you file your annual income tax return.
Are there penalties if you withdraw a CD early?
Banks can charge an early withdrawal penalty for taking money out of a CD before maturity. You may pay a flat fee or forfeit some of the interest earned. The amount of the penalty can vary by bank and by CD maturity term. Generally, the longer the maturity term, the higher the penalty ends up being.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
SoFi members with direct deposit can earn up to 4.20% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 4/25/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet. Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice. SOBK0123019
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Investing in ETFs, purchasing fractional shares, and funding an IRA are just a few ways you can invest $1,000 right now.Investing in ETFs, purchasing fractional shares, and funding an IRA are just a few ways you can invest $1,000 right now.
The post Best ways to invest $1,000 right now appeared first on Money Under 30.
A certificate of deposit â CD for short â is a low-risk savings account that holds a fixed amount of money for a certain time, such as six months, one year or five years. During that time, your deposit earns a fixed interest rate. Usually, the longer the term, the higher the interest rate. When […]
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
A certificate of deposit â CD for short â is a low-risk savings account that holds a fixed amount of money for a certain time, such as six months, one year or five years. During that time, your deposit earns a fixed interest rate. Usually, the longer the term, the higher the interest rate. When [â¦]
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
CIT Bank CD rates are competitive compared to other Banks’ CDs. For instance, a 6-month CIT Bank CD has a rate of 0.50%, which is way higher than the national average rate of 0.25%. How much you will earn depends on the length of the term. But one thing for sure is that the longer …
Continue reading “CIT Bank CD Rates: How Much Can You Earn”
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